Israeli forces have announced their withdrawal from the West Bank town of Bethlehem in the first stage of a new deal with the Palestinians aimed at quelling violence.

While the troops have now left the town, the army said in a statement that it intended to maintain a presence around Bethlehem - at least until Palestinian security forces take full control.

In exchange for the Israeli withdrawals from both Bethlehem and the Gaza Strip, Palestinian leader Yasser Arafat has agreed to launch a crackdown on militants - although the deal has already been rejected by key Palestinian factions.

Fierce gun battles erupted in the northern West Bank shortly before Israel started its pull-out from Bethlehem, one of several West Bank towns which the Israelis occupied two months ago.

The agreement to hand back control of Bethlehem and the Gaza Strip to the Palestinians is seen by the Israelis as a "test case" for further transfers of authority in the West Bank. There has as yet been no easing of restrictions in the Gaza Strip.

On Monday the United States welcomed the deal, which it said was an "encouraging" step towards resuming other peacemaking moves.

Tricky project

Clashes which broke out earlier on Monday in the northern Palestinian cities of Nablus and Jenin when scores of Israeli troops raided heavily-populated areas in the two cities, have underscored the difficulties the project will encounter.

Hamas and the Palestinian people reject any agreement which aims at destroying our resistance and ending the intifada

Hamas statement

A 13-year-old boy, Mahmoud Abu Oudeh, was hit by fire from an Israeli tank on the outskirts of Jenin when a dozen tanks and eight jeeps pushed into the town and the adjoining Jenin refugee camp.

He was shot in the head close to his house as troops opened fire to force people to return to their homes, his family said.

They added that it was two hours before Israeli troops allowed an ambulance to take their son to hospital, and he was pronounced dead on arrival.

Mahmoud Abu Oudeh's mother grieves for her son

In Nablus, a Palestinian was critically wounded during fighting when Israeli troops pushed into the city's historic market.

The troops destroyed two flats and a row of shops underneath with explosives. The army said it had uncovered a "large explosive laboratory" which it destroyed in a "controlled manner".

Palestinian opposition

The security deal, struck on Sunday, has already been rejected by key Palestinian elements, including Hamas, Islamic Jihad and even from within Yasser Arafat's Fatah movement, whose members said it was a poor substitute for full Israeli withdrawal.

"Hamas and the Palestinian people reject any agreement which aims at destroying our resistance and ending the intifada, which is what this agreement is aimed at," a spokesman told the AFP news agency.

Islamic Jihad, another militant organisation, said it would step up attacks on militant targets.

Ben-Eliezer and Yahya both expressed optimism at the plan

"The Palestinian people's answer will be to escalate the resistance to foil [Israeli Defence Minister Binyamin] Ben-Eliezer's plan," said Khalid al-Batsh, a Gaza Strip leader for the group.

"We in Islamic Jihad reject this agreement because it will consecrate the Israeli occupation of our land," he told AFP.

The armed wing of Fatah, the al-Aqsa Martyrs Brigade, has also warned the Palestinian leadership against endorsing the deal.

The confidence-building measure was reached by Mr al-Yahya and Mr Ben-Eliezer at talks in Tel Aviv after several days of relative calm on the ground.

Israeli forces have been in military control of most of the Palestinian towns in the West Bank for the past two months after a wave of suicide bombings by Palestinian militants.